Growth Scare

The stock market sold off this week, posting its worst week since September 2024.  The drop was triggered by several economic indicators that painted a concerning picture of the economy, consumers, and inflation. Nvidia, a key bellwether, posted strong earnings, but sold off anyway. In addition, markets remain concerned about tariffs coming from the White House, and the potential for a trade war.  Here is a quick summary of the events this week and why we remain optimistic that the economy will continue to grow.

Nvidia

Nvidia, which has been a leader in the stock market rally over the past 2 years, and a key bellwether in the artificial intelligence space, posted a 78% increase in year-over-year revenue this week. The company also raised its expectations for the current quarter, providing a forecast of $43 billion compared to the analyst consensus estimate of $41.8 billion.  You would expect that the market would respond favorably to such impressive results, and indeed the stock did rise on Wednesday, the day of the earnings release. However, Nvidia led the stock market decline on Thursday, falling more than 8%. Some of the sell-off could be related to profit taking, but some analysts point to the potential risks for tariffs and export restrictions on AI chips as a reason for the selloff.

Consumer Confidence

The February consumer confidence survey dropped to the lowest level in 3 years. Moreover, the consumer “expectations” component of the survey, which asks consumers about their outlook for the future, dropped to the lowest level since 2013. Some analysts consider consumer confidence a predictor of future consumer behavior, though the connection is weak.

Jobs

The jobs survey showed an increase in “jobs not so plentiful”, which rose to 50.3.  While this represents the worst reading in more than 3 years, it is also better than the average response over the past 10 years, reflecting a normalization of the labor market, rather than a troubling sign that the labor market could be in trouble.

Conclusion

So, what do we make of this week’s news?  It has been a tough week in the market. We expect the market to continue to be volatile in the short term, but over the remainder of the year, we continue to see a strong economy and corporate earnings that should drive stock prices higher. While there is a lot of noise, the fundamentals of the economy remain strong.